Single-family residence buy & hold investment in Nashville.
Purchase price: $495,000
Cash invested: $110,348
We operate this property as a STR in East Nashville. We furnished it ourselves and currently self manage the property via Airbnb. This house is projected to gross between $80-100k per year in bookings. The CoC return (based on $80-100k range for booking revenue) is projected to be between 28-46%. The total ROI, inclusive of loan paydown and appreciation will be conservatively 65% with a more aggressive target of 96% ROI.
What made you interested in investing in this type of deal?
With 15M + visitors flooding to Nashville every year, the demand for hotels and short term rentals is sky high. A STR provides a great opportunity for guests in larger groups to stay in one house together, and more than likely pay less per person/night than they would a hotel. The CoC return for a STR, in a city like Nashville, is substantially higher than a LTR and relatively easy to manage.
How did you find this deal and how did you negotiate it?
I worked with a local real estate agent who focuses on STR properties for investors. The majority of properties that are zoned for STRs with city codes, are sold extremely quickly and are usually 'off market' properties. It is very competitive and you have to act fast and have your investment criteria buttoned up and accurate.
How did you finance this deal?
30 yr conventional. I put 15% down. The rate as an investment property was a bit higher than we liked, but by putting less down with the slightly higher rate, our CoC return was higher, so we opted for this option and will likely refinance in about a year. The appreciation alone will likely get us to 20% plus equity within one year. I base this on similar comps in the area and how much other properties have appreciated on this side of town.
How did you add value to the deal?
We fully furnished it, with unique touches. The one thing that helps us stand out and secure bookings (and ultimately charge a premium on the nightly rate) was paying a mural artist to paint an interactive mural on the wall. We have an instagram and facebook page that our guests can tag us in their photos or use our #hashtags. Popular for bachelorette parties, this will be free marketing for us for visitors around the world that post photos in our house.
What was the outcome?
The outcome has been great so far (minus the past month with COVID - travel has been down, but we have still been able to cover costs with longer term bookings at a discounted rate). We listed on Airbnb in mid December, 2019. Bookings picked up quickly. March we were slated to have over $12k in bookings revenue. About $5k of that got slashed from cancellations due to COVID. Once travel picks back up, we are forecasting this rental to gross $80-100k/year.
Lessons learned? Challenges?
STRs in popular markets move very quickly. Properties that are listed are often under contract within a few days. I found that having your criteria and ROI worksheets ready to go, so you can quickly evaluate properties and be ready to pull the trigger as soon as a property meets the criteria. Having a local real estate agent who also invests in STRs and focuses on selling investment properties is a huge plus, as they can help you navigate which investment will be best.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
Yes, for the Nashville market I recommend Steve Frye. He has only been an agent for about 1.5 years now, however he has focused and created a niche in STRs investment properties. He has been extremely successful and built up a tremendous network.
How many beds/baths? Ave daily rate?
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